Friday, June 27, 2014

Make ‘em, Sell ‘em, and Fix ‘em

Last week, at the 2014 Telematics Detroit conference, I witnessed leading experts, OEMs, and vendors discuss the future of vehicle telematics. It was an impressive conference, but I left with the feeling that we’re missing the point. As an industry, our number one priority is to produce quality products that bring joy to our customers, our dealers, and to us - the OEMs. Soichiro Honda famously referred to this as “The Three Joys”. Telematics should enable "The Three Joys"; however, buzzwords such as the “Internet of Things” (IoT) and the “Mobile Revolution” have led the industry to focus telematics efforts on in-vehicle infotainment and supporting the customer’s digital lifestyle. Are these truly the most impactful customer delighters?

Ahh. Heck, what does Honda know anyway?

Maybe a lot.

The consumer electronics industry – not the automobile industry – has already cracked this nut. Ultimately, our in-car “connected” experience is going to be dictated by the same technology that powers our mobile devices. Philip M. Abram, Chief Infotainment Officer at GM, sums it up this way: “It’s inevitable, I believe, that people will want their digital lives brought into the car. Right now, that’s being defined by smartphones. As automakers, we have to accommodate that.”

In fact, a recent survey from Gartner found that 58% of vehicle owners agreed that “automakers should just let companies like Apple, Google, or Samsung design and manage their in-vehicle technology offerings instead of developing their own systems.” Of course, this must be a collaborative effort between the auto industry and the consumer electronics giants. So, what’s the best way to employ telematics and the connection it provides to achieve Soichiro’s “Three Joys”?

Let’s take a step back for a moment. At the simplest level, what does our industry do? We build cars. We sell cars. We fix cars. So, rather than designing the next car to function like a Samsung Galaxy S5 phone, maybe we should concentrate on using telematics to help us … build better cars, sell more cars, and fix cars more effectively.

Building Better Cars – The vehicles we manufacture are impressive engineering statements; they are reliable and robust. This is the result of years of R&D followed by intensive testing and data collection. Unfortunately, unexpected failures occur when the product enters the real world, due to driver error, poor maintenance and, yes, even design mishaps. However, a telematics data connection could turn every unit in operation into a live, real-world test rig to log and record data. In fact, the vehicle’s ECU already monitors numerous onboard vehicle sensors.

Imagine if data from vehicles in the U.S. were logged and pushed to the cloud regularly. Engineers could monitor real fuel efficiency, stress cycles, usage behavior, and failure rates as opposed to those predicted in a test environment. Further, the sample size would be enormous, due to large owner populations.

Selling More Cars – One can argue that infotainment and full connectivity will sell more cars. That may be true in the short term; however, people are already accustomed to such features in their day-to-day lives. We have Nest, LIFX, and even Egg Minder (a smart egg carton that lets you know how many eggs you have and how old each one is). Our smartphones fill all of our “digital lifestyle” needs with applications that are intuitive and backed by millions of dollars of development. In the future, this will not be a differentiator, especially as consumer electronics companies get more involved. What does matter most to a customer for a new car purchase? According to the NADA 2013 Survey, it’s Quality, Dependability, and Fuel Economy. In other words, building better cars will sell more cars.

Fix Cars More Effectively – Service departments generate the majority of profits for dealers, so how can we use telematics to fix cars more effectively? The answer is both simple and sophisticated. Instead of infotainment, telematics should be employed to send a massive amount of vehicle data to the cloud. OEMs already have access to repair order data across their dealer networks. Marrying these two data sets would create a very effective predictive analytics tool.

Just think: Op codes and repair order data could be mapped to driver usage and sensor readings. The OEM could use that data to identify trends that precede, say, an O2 sensor failure or the need for a brake job. When a vehicle is scheduled for service, the tech/dealership could check the database and learn that the vehicle has an 82% chance of an O2 failure, based on the historical trends for that model. This also ties into selling more cars. The 2014 Consumer Sentiment Survey indicates that customers who are “Very Satisfied” with their service experience are 21% more likely to repurchase a vehicle from that brand than customers who are just “Satisfied”.

The bandwidth requirements for such data flows are minimal and could easily be offered for free by an OEM (whereas multimedia, such as Pandora, requires significantly more bandwidth). The major hurdle will be enabling such data flows on a large number of vehicles. The path of least resistance is to place telematics systems in new vehicles. For existing vehicles, dealers could deploy Sim Card- enabled tools that fit into the existing OBD-II port.

Bottom Line: As an industry, we’ve become infatuated with the “Mobile Revolution” and the “Internet of Things”. We have taken a myopic view of telematics’ capabilities, focusing on how to entertain the customer. Instead, we should target our efforts at what really drives our customers’ purchasing behavior – high quality cars and high quality service. Our industry needs to stick to what it does best, and not try to design apps that predict our music preferences or suggest new blogs to read.

Sunday, June 22, 2014

How to Get the Most from Your Dealer Satisfaction Survey

So, you solicit your dealers once a year to ask for their feedback on how well you’re doing to support their needs. That’s a good first start; not every OEM takes even this first step. However, you’re starting to find that your dealers are losing interest, or maybe your scores aren’t improving, or you’re starting to question how well you’re leveraging the survey results. Don’t worry; you’re not the only one in this predicament.

At our 2014 NAPB, Carlisle facilitated a panel discussion with some OEMs that are among the best-in-class (BIC) at managing their survey processes. How do we know they’re best-in-class? For starters, they are all making dramatic, long-term improvements in their satisfaction scores from dealers. Examples from two of these OEMs are below:

Another measure of BIC is dealer response rate, as dealers will not continue taking the survey in large numbers if they feel they are wasting their time. Our BIC OEMs are all achieving rates in the 80%-100%.

So, what are these OEMs doing? They are taking four simple steps:
  1. Pre-Survey: Remind Dealers What You Did Over The Previous Year
    While you may have been working like a dog over the past year to implement improvements that respond to last year’s survey results, your dealers aren’t always aware of this. Remind them what they said last year, and what you’ve been doing in response to what they said.
  2. Survey Launch: Set 100% Response Rate Expectation
    The beauty of internet surveys is that you don’t just mail surveys and wait for results. The survey administrator can constantly track response rates, which allows you to target the non-responders. Send out 2-3 updates throughout the survey period to the non-responders. Involve your field force by sharing the response updates with them. One of our BIC OEMs tells us that, “100% response rate is the corporate expectation. All District Managers with 100% response rates are publically recognized.”
  3. Post-Survey: Dive Into The Results
    Simply looking at your overall result is just the tip of the iceberg. You got a 43% satisfaction score in Parts Delivery, a drop of 10 points from last year…What does that mean? Segment your scores. Did scores drop across the board, or just in certain regions…or just for dealers assigned to a certain carrier…or just for certain size dealers…or just for dealers with an above average amount of emergency (i.e., parcel) shipments, etc.?

    Read your dealer comments as well. The numbers only serve as a beacon, pointing out possible problem areas. The comments provide the detail necessary to identify and, ultimately, fix the actual problem. Do you want to really blow your dealers’ socks off? Call them to discuss their comments. Not only will you get a better understanding of what the real issues are, but you will send an extremely strong message that this survey is more than lip service. Your dealers will know that you really are committed to improving your performance.

    Most of the BIC OEMs conduct this analysis in conjunction with developing action plans. Process owners (e.g., warehouse operations, transportation, marketing, warranty, etc.) are assigned the task of analyzing their unique survey results, identifying the key issues, and developing action plans to address the highest priority issues. Without instituting an action plan process, the survey results can become nothing more than a fun read.
  4. Post Analysis: Communicate Results to Dealers
    Dealers want to know they didn’t waste their time taking the survey. Without this feedback loop, respondents will become frustrated and the response rate will take a nosedive. The format is not important—we’ve seen everything from emails and updates posted on the dealer portal to videos, brochures, and presentations at annual dealer meetings.

    What is important is the message, which should at the least contain:
    • Thank you for taking the survey
    • Overall results
    • Areas where you did well
    • Areas where you didn’t do well
    • If you’ve figured it out, how you plan to address the problem areas
Bottom line: If managed appropriately, these surveys can have a tremendous impact on dealer satisfaction and, ultimately, key metrics that drive the success of our own businesses (i.e., purchase loyalty, service retention, repurchase intent, etc.). Conversely, if we are just going through the motions so we can “check off” the customer service box, it can be a tremendous waste of time, energy, and resources.

As the facilitator of 10+ industry-syndicated dealer surveys, Carlisle feels responsible for helping all of our participating OEMs choose the right path. If you would like any help, suggestions, or just the chance to discuss your approach, feel free to give us a call.

Friday, June 13, 2014

Why I Will Go Back To My Dealer!

In past blogs we have discussed how the dealer ‘got it wrong’; this story is about how my dealer, and especially my Service Advisor, got it right.

First, a little background: From our 2014 Consumer Sentiment Survey we know that, aside from cost, the most important thing to the customer is their time. Customers want a convenient appointment and they want their car ready when it’s promised. Dealers are getting better at this, but what follows is an example of how to keep a customer happy even when something unexpected happens.

In need of an oil change, I made an appointment with my dealer for Saturday morning at 8:15 a.m. Perfect, I thought – first appointment of the day, so I’d be in and out. I arrived with about a half dozen other cars waiting in line to pull into the service area. I was greeted promptly by Scott who happily took my car and said they’d take care of the oil change. Off I went to the waiting area with my iPad and a coffee. About an hour later Scott walked by and said my car should be just about done. Great!

Well, a bit more time rolled on, and I realized that people who had come in after me were already getting their cars back. Now, I’m not so happy. At 10:00 a.m. I finally went to the service desk to get a status update, and another advisor looked up my car and said, “It’s just about done.” Scott was with another customer, but as soon as he finished he came over and apologized for the delay. He didn’t know why it was taking so long, and said the oil change was on him. Well, that was a first! I had lost almost two hours on a Saturday morning, but for free service it could be worth it.

So back to the waiting room I went, only to sit for another 20 minutes. Now that free oil change didn’t seem worth it! Scott finally came to say my car was ready. Free oil change for 2 ½ hours was not going to cut it. In my mind I was going to find a new dealer or start going to the Jiffy Lube up the street because this wasn’t worth my time.

As my car pulled up I was amazed to see that they had buffed out a large scrape that had been on my front bumper; something I’d wanted to fix for months, but didn’t have the money or the time to deal with. All that waiting was well worth having my car returned looking brand new! Scott apologized again. He acknowledged that the service time was unacceptable, and that while he couldn’t give me back my time, he wanted to make up for my long wait.

Bottom Line: We know customers want their vehicles ready when promised, but sometimes, no matter how well you plan, things still go wrong. In the end, it is not the situation, but how you handle it that can make a customer happy and want to return.

Sunday, June 8, 2014

Supplier Risk Management: Here Today… Gone Tomorrow?

It is an all-too-familiar reality: a key parts supplier has vanished overnight, and now you’re left with a curt email thanking you for your business—and chaos in your office. You’ve got to find an alternative solution to fulfill your dealers’ part orders. Sometimes a supplier’s demise is slow and obvious, but other times a lack of vigilance will cause you to miss the signals until it is too late.

This unfortunate situation hit me once while traveling in Africa. In a major metropolitan area, we were told to avoid exchanging money at banks because of usurious exchange rates. Instead, we were introduced to a man in a back alley… We’ll call him “Frederick”. We were told that Frederick was “always” there, and offered a favorable rate. For a few weeks, we went to Frederick for our all cash needs with no problems. I ran out of money one afternoon, as one does, and grabbed a wad of American bills to exchange with Frederick. I walked the few blocks from our living quarters and turned into the alley behind a convenience store.

No one was there.

I asked the store owner about Frederick, but he had no information. No one in my group knew what had happened to Frederick. Our link to cash had disappeared without a trace. For the remainder of the trip, we were overcharged and had to pinch every penny to get by.

Frederick’s disappearance meant a hefty added cost on our trip, not unlike the effect of a key supplier’s abrupt closure on you and your network. One way to reduce this risk is to monitor the business health of your suppliers.

Continuously checking on your key suppliers is like going to your dentist: if you do it every six months you’ll avoid a nasty surprise. In supplier risk management, proactive monitoring will help avoid major speed bumps in your supply chain. Some information worth gathering about your suppliers:
  • Regulatory and legal risks
    • Have lawsuits been recently filed against the supplier?
    • Are your suppliers following all pertinent government regulations?
    • Does recent legislative action in their state or country affect their ability to deliver product?
  • Secondary or tertiary supplier risk
    • Do multiple key suppliers in your business share common suppliers?
  • Share of business
    • How much of your supplier’s business do you provide?
    • Do they have another key customer whose business’ health could affect yours?
    • What share of your supplier’s business does automotive/heavy equipment parts supply make up?
  • Trends and Environment
    • What trends do you see in your supplier’s financial statements?
    • Is their state or county experiencing any hardships?
    • What is the market like for commodities used by your suppliers?
    • What other relevant market conditions specific to your supplier should you be aware of?
By periodically assessing these risks you can open up lines of communication with suppliers. You can identify opportunities to partner with a supplier to improve its health, or you can change your entire sourcing strategy. The goal is to avoid a sudden shortage of a critical part or material. Research your suppliers. You’ll give yourself the time you need to implement a safeguard. Assessing supplier risk factors will also save money and help keep your customers loyal.

Bottom Line: Avoid supply chain disruptions and the headaches that follow by tracking your suppliers’ health. Both you and your suppliers can benefit from using information to make your relationship transparent.

Monday, June 2, 2014

Brand Loyalty Through Independent Repair Shops

In most of our posts, we aim to provide insights and answers. But this time we’re going to ask questions…because we don’t yet know the answers. (At least, we can’t prove that we do—yet).

Here’s the challenge: We know that independent repair shops have a significant share of the market for maintaining and repairing vehicles, especially older vehicles. Further, we know that the average length of new vehicle ownership has been increasing in recent years, and that owners of older cars are less brand-loyal when they buy their next vehicle. So, we have a significant fraction of owners that don’t come to dealers for service, and are brand loyalty risks.

Here’s the main question: How can we influence these customers’ brand loyalty? Specifically, how should we interact with independents (and chains, for that matter) to maximize our customers’ brand loyalty? Put simply: How can we have our customers’ experience at an independent repair facility reflect well on our brand?

This is a tricky question to answer. Dealers and OEMs have a complicated relationship with independent shops, which are our main competition for service. But, they can also be our customers; plenty of dealers sell genuine parts to independents. Finally, independents are also, to some degree, OEMs’ partners. We know that no dealer will ever get 100% share of the service market. Don’t we want our vehicle owners to have a great repair experience, no matter where they go? When the repair is finished, don’t we want the owner to still love his car—to love it so much that he’ll want to buy his next car, new or used, from us?

I argue yes, that is what we want. Sure, we’d like vehicle owners to be so dissatisfied with the independents that they’ll return to the dealers for service. But, more than that, we don’t want owners to have a negative service experience—whether at a dealer, a chain, or an independent—that would influence their overall opinion of the vehicle. If a repair experience goes bad, will the owner blame the crappy shop or his crappy car?

It depends. In some fraction of cases the owner will blame the vehicle. So, the next question is: Can offering robust product support resources (i.e. training, diagnostics, service information) to independents lead to better repairs, lower cost of ownership, improved owner satisfaction, and loyalty to the brand? And, because independents typically service many brands, can we also use superior support to help conquest customers from other brands?

We are, of course, required to provide a certain level of information (and Right to Repair legislation may broaden those requirements, but that’s a subject for another day). So, the next question is: Can we use these resources, strategically, to improve brand loyalty?

Aside from the direct benefit to the customer of a higher quality repair, is there any merit to the claim that independent repairers can be effective brand advocates? Techs and shop managers do have opinions about what vehicles they prefer to repair. How often are they advocates for particular brands? In short, if we can provide effective support to independents can we improve our customers’ brand loyalty?

We don’t know the answer to these questions. Teasing out the factors that influence customers’ brand loyalty is hard, especially when looking at indirect factors such as late-in-life service experiences. Then, there’s the thorny issue of partnering with our competition—that concept doesn’t always go over so well with our dealers. We’re looking at questions that are hard and politically unpopular to answer. It’s not surprising that no one (to our knowledge) has cracked the code on this topic.

We think it’s worth investigating. Brand loyalty involves big dollars, in terms of lifecycle value, for each and every customer. Even secondary factors such as independent service experiences matter, and have a place in our overall brand strategy loyalty.

So, how can we answer these questions?

There’s plenty of research that examines vehicle brand loyalty. We know that many factors influence brand loyalty. Examples are service experiences at the dealer, garage composition (what other brands a household owns), and even recent rental experiences. However, there’s less clear data, at present, on the impact of service experiences at independents. That’s because these experiences are typically perceived to be a secondary or tertiary influence on purchase behavior. So, not only are the stakes somewhat smaller, teasing out the signal from the noise is also more difficult. We need information that will let us control for all the other factors.

Here’s one part of the approach: Like other loyalty studies, we want to sample recent purchasers and ask about all the factors that drove them to their purchase decision. Unlike other studies, we’d focus on owners who had older cars and were not dealer loyal. Further, we’d use responses regarding the typical loyalty factors to segment owners into similar groups, in order to isolate the one set of questions that would be unique to this study: an in-depth look at experiences with independent and chain service outlets, and how these experiences influenced perception of their vehicle, and ultimately their recent purchase decision. The goal: to determine how much these experiences influenced the purchase decision.

The other part of the research would explore the linkage between OEM support and independent repairers’ repair quality and perception of OEMs. This research would likely consist of focus groups of independent repairers, as well as a conjoint survey of such repairers. The goal: to assess what forms of support have the greatest impact on repairer effectiveness and advocacy.

Carlisle & Company is looking for OEMs that are interested in collaboratively researching this topic. We believe that the ROI of such research is worthwhile. If interested, contact